China has launched an anti-dumping probe into propionic acid from the US, as heavy dependence on American supplies of the widely used chemical ingredient is sounding alarms in the domestic industry.

The probe, which began on Friday, will last at least a year and could be extended until January 21, 2025, under particular circumstances, the Ministry of Commerce said.

Propionic acid is commonly used in foods, pesticides, pharmaceuticals and drug intermediates. It inhibits the growth of mould and some bacteria – acting as a common preservative.

The request for the anti-dumping investigation was filed by the Jiangsu Chemical Industry Association, a major domestic producer that holds more than half of the Chinese market share, and it targets US sales of propionic acid in China from 2019 through the first three months of 2023, the ministry said.

The probe came against the backdrop of rising US-China tensions, and also after Beijing banned the export of two key metals for semiconductors – germanium and gallium – citing national security concerns. But the move is widely considered a response to the US’ growing tech-containment measures targeting China.

Dumping is usually seen when goods enter a country’s market during the regular trade process at a price below their normal price in China.

The association said the price of propionic acid in China fell by 28.2 per cent in the first quarter of this year compared with the same period last year, according to the attachment provided by the ministry.

This followed a drop in price of 6.9 per cent from 2019-22, impacting China’s domestic chemical industry, the association said.

“To seize or maintain market share in China, US manufacturers have begun to adopt a price-cutting strategy to dump large quantities of propionic acid products into the Chinese market, and this has had a serious impact – and damaged – the domestic industry,” the ministry-issued document said.

“If anti-dumping measures are not taken immediately, the domestic industry will suffer even more serious damage,” the Jiangsu association appealed in the document.

As the world’s biggest consumer market, China’s demand for propionic acid has continued to rise in recent years, with its total consumption in 2022 increasing by 26. 7 per cent from 2019, according to the ministry.

While the ministry’s data shows that the US is China’s main provider of propionic acid, with China’s share of imports from the US rising from 97.41 per cent in 2020 to 100 per cent in the first quarter of this year.

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Consumption of the chemical also increased by 3.5 per cent in the first quarter of 2023 compared with the same period last year, according to a report released in January by Newsjie.com, a Beijing-based market research group.

The report said that since the easing of zero-Covid measures, infections have pushed up demand for ibuprofen, a fever-reducing drug with propionic acid as an intermediate.

Nearly 60 per cent of China’s propionic acid is used in agricultural grains and feed preservation, while Beijing’s call for food security is likewise pushing up its domestic demand, according to data provided last year by Chyxx.com, a Shenzhen-based Research Consulting firm.

When Washington initiated the trade war with China in 2018, propionic acid was listed as one of the chemical products subject to a 25 per cent tariff increase for China.

Now Washington is stepping up its siege on China’s tech sector, as it is considering new export restrictions on chips made by Nvidia and other chip companies to customers in China, the Wall Street Journal reported late last month.

Source: scmp.com